Foundation Finds No Wrongdoing by Former AIG Chief Executive

CNBC.com

Monday, 5 Mar 2007 | 5:40 PM ETCNBC.com

SHARES

Former American International Group Chief Executive Maurice "Hank" Greenberg acted in "good faith" in selling Starr Foundation assets to companies he controls, according to a report from the multibillion-dollar nonprofit group.

The report, released Monday, answers accusations made more than a year ago by former New York Attorney General Eliot Spitzer, who is now the state's governor.

John Milgrim, a spokesperson for the office of current Attorney General Andrew Cuomo, issued this statement: “This office is not surprised that a foundation controlled by Mr. Greenberg has issued a report attempting to absolve him of wrongdoing. The case we have going forward is aggressively being pursued.”

"The Starr Foundation issues were never brought to court, they were raised in a report to the Starr Foundation and that is when the Starr Foundation went out and hired these independent doctors and former judges to make a thorough, independent investigation," Boies said. "When they come back with the answers to the Attorney General’s questions, I think it is unfortunate that some member of the Attorney General's office before they even read the analysis, and had gone through the issues in detail, issues some kind of statement like that, which is obviously confused because he obviously thought there was a case pending against Mr. Greenberg with respect to the foundation, and that is simply not so."

In December 2005, Spitzer questioned whether Greenberg and other executors of the Starr Foundation had enriched themselves at the organization's expense in the sale, which took place more than 30 years ago.

Starr said its executors "prudently performed their duties and there is no basis for the ... contention to the contrary."

The foundation was started by AIG founder Cornelius Vander Starr and now has $3.5 billion in assets.

After Starr's death in 1968, Greenberg and other executors sold some of the foundation's assets to two companies controlled by Greenberg and others at low prices, Spitzer said. These two companies then sold the Starr assets to AIG at far higher prices, according to a letter Spitzer sent to the foundation.

Spitzer, who has filed civil fraud charges against Greenberg for improper accounting, asked the foundation to investigate whether Greenberg and other Starr executors who were on both sides of the transactions "benefited from the Foundation's loss."

The Starr Foundation said a committee that included two former judges had decided that Greenberg and other executors had followed Vander Starr's intent in selling the shares, and it would not be in the interest of the foundation to pursue any litigation against them.

Greenberg has been waging a battle to save his reputation. While not charged with any crime, he was forced to resign as chairman and chief executive of AIG, the world's largest insurer, in February 2005 after more than 30 years as its head. Before his death, Vander Starr had chosen Greenberg to lead the company and other Starr subsidiaries.

In February 2006, AIG paid $1.64 billion in fines and reparations, a record regulatory settlement by a single company, to settle charges of fraud, bid-rigging and improper accounting. The charges, brought by Spitzer and the U.S. Securities and Exchange Commission, stemmed from the period when Greenberg headed the company.

Greenberg still has to face New York proceedings related to AIG, "the General Re and Capco transactions, the one that the Attorney General's office already eliminated almost all of the large money items from," Boies said. "The remaining issues there represent 1% or 1.2% of revenues of AIG at the time the transaction took place and they really weren't material transactions."